The Pickle of Fixing Hotel Tariffs

Following critiques and appraisals offered up form a number of tourism observers and members of the Indonesian Hotel and Restaurant Association (PHRI), the head of the Badung Tourism Service, Raka Darmawan, has chipped in his opinion on the possibility of establishing regulations to standardize hotel tariffs.

As reported by Bisnis Bali, Darmawan commented on fixed hotel tariffs, saying on April 4, 2013, “This appears to be something that is impossible.”

The top tourism officer for the regency explained that any effort to standardize hotel rates brings with it the possibility of monopolies and cartels.

Because of this, The National Commission for the Supervision of Competitiveness (KPPU) recently issued a warning against announced plans by the province of Bali to standardized hotel rates. Saying his office was therefore unable to introduce fixed prices for hotels, Darmawan said that his office must surrender matter of pricing to market forces.

Darmawan emphasized that issues of hotel tariff are irrevocably tied to matters of facility and service. He pointed out how some three-star hotels manage to present facilities that exceed those offered by five-star hotels. Adding, “If the hotel accepts this situation, then clearly there is no problem.” He also said the need to consider standardization of pricing is not pressing.

He continued, saying the biggest culprit in the current price war are city hotels or budget hotels - built on narrow strips of land with high room counts.

The resulting City Hotels and Budget Hotels can sell their rooms at very low room rates. For this reason, he said his office was working to limit the number of budget hotels. Badung is now reviewing rules on the minimum size of land needed for hotel development and room ratios as a mean to curb new budget hotel projects.